Welcome to the latest installment of Finance Friday, a new monthly column at Footwear News that takes a closer look at the intersection of economic innovation, retail and the footwear industry. On the first Friday of every month, FN will analyze shifting consumer purchasing behaviors, the launch of new FinTech and how businesses are embracing a new digital-first economy.
The B2B market is regularly forced to play catch up with the B2C market – and payments are no exception. But this delay in innovation and mass-adoption can also has some benefits for industry players. By observing the trends and the successes of the consumer market first, businesses can identify the most effective finance technologies for their own operations.
One example of this is in the way consumers prefer to make payments for multiple goods: in one place, in one transaction. This convenience has contributed to the rise in popularity of online marketplaces and multi-brand retailers, allowing shoppers to combine their purchases into a unified process. Now, there are companies like Marqueta who offer the same service to the online marketplaces themselves.
A challenge for these marketplaces is paying the multiple merchants involved in what might look like a single purchase for the consumer. These merchants also rely on, or at least benefit from, quick payment. With a service like Marqueta, each transaction automatically generates a series of one-use virtual cards that merchants can process as they would a customer card; this adds a layer of security to the process and removes additional bureaucracy for the marketplace.
“Businesses that were once limited by slow legacy platforms, that did not allow for customization, are now allowed to instantly issue physical, virtual and tokenized cards with more flexibility, control and scale,” said Peters. “Marketplaces that leverage payment cards with Marqeta can replace existing check or ACH payment methods that may be used to pay sellers, to offer a more seamless payment experience.”
B2B companies are also interested in other elements of the consumer experience, such as earning rewards on their purchases. While corporate credit cards have long been in use, financial service companies like Brex are aiming to disrupt this market by creating tailored rewards cards for e-commerce and start-up businesses.
Unlike a traditional credit card, these offers come with specific rewards categories in areas that e-commerce brands spend the most such as marketing. In addition, there is a 60-day interest-free credit limit to accommodate the longer pay terms associated with the retail industry. In this way, brands can use the card for both short-term spending and longer-term working capital. There is also discounted access to relevant services and software like Google Ads and Amazon Web Services.
“For e-commerce businesses, it takes about 60 days for them to get inventory, buy ads, market it and sell it; 30 days isn’t enough,” said Michael Tannenbaum, CFO at Brex.
Lastly, there’s the growing interest in flexible payments for small- and medium-sized businesses. Buy now, pay layer solutions have been rapidly adopted in the consumer market, enabling shoppers to pay for their items across a number of installments instead of a single lump sum up front. In an American Express survey last year, AmEx found that 78% of SMBs believe payment flexibility would be important that holiday season.
For smaller businesses, the volatility of the sales market and the disruption caused by order delays last year revealed a need for better budgeting tools. To address this need, American Express introduced a Pay Over Time solution for its SMB customers that allows them to carry a balance with interest, not just pay the amount in full.
“We’ve long heard from our card members who are small business owners that increased payment flexibility is important to them,” said Brett Sussman, VP of global commercial card lending at American Express. “Pay Over Time is another step in our broader strategy to provide business owners the flexible solutions they need to easily and efficiently manage payments and cash flow.”